Getting a car loan nowadays is easier than ever. Still, a few people fail to get approved car loans for reasons that could have been easily avoided. Lenders have their own reasons for not approving certain loan applications. But one thing is for sure, these applicants have not shown they are capable of paying back the loan. You’ll need to prove otherwise if you want to maximise your chances of being approved for a car loan. How to do so? Here are some steps that can help you get approved for a car loan.
- Consider Your Monthly Income, Savings, and Debt
- Choose a Car within Your Budget
- Maintain a Good Credit History
- Get a Permanent Employment
- Show a Proof of Residence
- Consider Your Age
- Compare Available Loan Options
When applying for a car loan, the first thing that lenders will evaluate is your monthly cash flow, including your monthly income, your existing loans, and the money you have in the bank. This will determine if you are capable of handling the monthly car loan repayments on top of your expenses and debt payments.
If you don’t have a high income, try to lessen your debt and increase your savings. If the numbers still don’t look impressive, see if you have other assets that you can put up against the car loan.
Approved car loans depend on your monthly income, savings, and existing debt, you can calculate the budget that you have for your monthly car loan repayments. To maximise your chances at car loan approval, you need to stick to that budget. This might mean choosing a cheaper car.
Lenders also consider credit history as an important factor when approving car loan applications. It shows how well you have managed your previous loans for the past five years. Make sure to maintain a clean credit history so that you will appear as a good creditor. If there is any erroneous mark on your credit report, try to clear it by sending a dispute letter to the credit bureau.
Even if you have large savings with good credit history and no outstanding debt, but you are currently unemployed, lenders would probably still not approve your car loan. Permanent employment assures lenders that you will have a source of income for the entirety of the loan term. Avoid company hopping and stay with one employer. Make sure not to apply for a car loan during your probationary period or else it may be rejected.
Another way to show your financial stability with lenders is by showing proof of residence. If you can provide the mortgage details of your own home or an apartment lease contract, it will be a big plus on your car loan application to be approved. Plus, it also gives the lenders solid information where to locate you in case you default on your loan.
If you are 18-20 years old, you belong to the age group that is considered financially reckless from the standpoint of lenders. It would be a high risk for them to approve your car loan given that you are still a new professional. If you are within this age group, you may want to ask assistance from your parents first to get a guaranteed car loan approval. If not, try to build a good credit history and large savings before applying to increase your chances of approval.
There are many loan products available in the market where you can choose the best that will fit your financial profile. Secured loans can be a good option since the car itself will be the lender’s security on your loan. Applying for a longer term with a fixed interest rate might also be a good option for a lower monthly repayment.
Providing a guarantor or a collateral will also increase the chances of your car loan approval. Do your research so you can choose the right car loan product for you. Otherwise, try reaching out to loan brokers who will provide you with all the information that you need.
Get your Car loan with We Are Loans
We Are Loans is one of the top car loan providers in Western Australia. Whether you are purchasing a new or used car, we promise only the most competitive rates for approved car loans. Talk to our finance professionals so we can help you get your car loan approved today.